##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  To
 Commission File Number 333-150888
 T3 MOTION, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-4987549(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2990 Airway Avenue, Suite ACosta Mesa, California
    
    92626(Address of principal executive offices)
    
    (Zip Code)
 (714) 619-3600
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



T3 MOTION, INC.  INDEX TO FORM 10-Q  March 31, 2011
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months
Ended March 31, 2011 and 2010 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Deficit for the Three Months Ended March
31, 2011 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011
and 2010 (unaudited)
    
    
    6Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATION
    
    
    42Item 1. Legal Proceedings
    
    
    42Item 1A.
Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults upon Senior Securities
    
    
    46Item 4. (Removed and Reserved)
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    47Signatures
    
    
    48EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    144,070
    
    
    $
    123,861Restricted cash
    
    
    10,000
    
    
    
    10,000Accounts receivable, net of reserves of $47,626 and $50,000, respectively
    
    
    568,602
    
    
    
    595,261Related party receivables
    
    
    37,571
    
    
    
    35,722Inventories
    
    
    896,157
    
    
    
    1,064,546Prepaid expenses and other current assets
    
    
    631,463
    
    
    
    251,467Total current assets
    
    
    2,287,863
    
    
    
    2,080,857Property and equipment, net
    
    
    482,951
    
    
    
    564,700Deposits
    
    
    934,893
    
    
    
    934,359Total assets
    
    $
    3,705,707
    
    
    $
    3,579,916LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,647,227
    
    
    $
    1,335,761Accrued expenses
    
    
    1,776,066
    
    
    
    1,483,220Related party payables
    
    
    51,973
    
    
    
    51,973Note payable
    
    
    93,468
    
    
    
    243,468Derivative liabilities
    
    
    8,643,368
    
    
    
    9,633,105Related party notes payable, net of debt discounts
    
    
    6,621,000
    
    
    
    4,391,121Total current liabilities
    
    
    18,833,102
    
    
    
    17,138,648Long term liabilitiesRelated party notes payable
    
    
    1,000,000
    
    
    
    2,121,000Total liabilities
    
    
    19,833,102
    
    
    $
    19,259,648Commitments and contingenciesStockholders deficit:Series A convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; 11,502,563 shares issued and outstanding
    
    
    11,503
    
    
    
    11,503Common stock, $0.001 par value; 150,000,000 shares authorized; 5,065,847 shares issued and outstanding
    
    
    5,066
    
    
    
    5,066Additional paid-in capital
    
    
    30,477,262
    
    
    
    29,419,540Accumulated deficit
    
    
    (46,625,595
    )
    
    
    (45,120,210
    )Accumulated other comprehensive income
    
    
    4,369
    
    
    
    4,369Total stockholders deficit
    
    
    (16,127,395
    )
    
    
    (15,679,732
    )Total liabilities and stockholders deficit
    
    $
    3,705,707
    
    
    $
    3,579,916
 See accompanying notes to condensed consolidated financial statements
 3




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##### Table of Contents



T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
 COMPREHENSIVE LOSS (UNAUDITED)
 Three Months Ended March 31,2011
    
    
    2010Net revenues
    
    $
    996,562
    
    
    $
    1,149,426Cost of net revenues
    
    
    956,932
    
    
    
    1,127,449Gross profit
    
    
    39,630
    
    
    
    21,977Operating Expenses:Sales and marketing
    
    
    311,750
    
    
    
    427,654Research and development
    
    
    233,912
    
    
    
    320,506General and administrative
    
    
    821,545
    
    
    
    1,029,413Total operating expenses
    
    
    1,367,207
    
    
    
    1,777,573Loss from operations
    
    
    (1,327,577
    )
    
    
    (1,755,596
    )Other income (expense), net:Interest income
    
    
    43
    
    
    
    903Other income, net
    
    
    991,694
    
    
    
    755,555Interest expense
    
    
    (303,945
    )
    
    
    (681,801
    )Total other income (expense), net
    
    
    687,792
    
    
    
    74,657Loss before provision for income tax
    
    
    (639,785
    )
    
    
    (1,680,939
    )Provision for income tax
    
    
    800
    
    
    
    800Net loss
    
    
    (640,585
    )
    
    
    (1,681,739
    )Deemed dividend to preferred stockholders
    
    
    (864,800
    )
    
    
    (1,672,882
    )Net loss attributable to common stockholders
    
    $
    (1,505,385
    )
    
    $
    (3,354,621
    )Other comprehensive income (loss):Foreign currency translation income
    
    
    
    
    
    
    205Comprehensive loss
    
    $
    (640,585
    )
    
    $
    (1,681,534
    )Net loss per share: Basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.74
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    5,065,847
    
    
    
    4,505,096
 See accompanying notes to condensed consolidated financial statements
 4




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##### Table of Contents



T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT (UNAUDITED)
 AccumulatedPreferred
    
    
    
    
    
    
    Common
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred
    
    
    Stock
    
    
    Common
    
    
    Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    DeficitBALANCE  December 31, 2010
    
    
    11,502,563
    
    
    $
    11,503
    
    
    
    5,065,847
    
    
    $
    5,066
    
    
    $
    29,419,540
    
    
    $
    (45,120,210
    )
    
    $
    4,369
    
    
    $
    (15,679,732
    )Preferred stock dividend (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    864,800
    
    
    
    (864,800
    )
    
    
    
    
    
    
    Share-based compensation expense (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192,922
    
    
    
    
    
    
    
    
    
    
    
    192,922Net loss (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (640,585
    )
    
    
    
    
    
    
    (640,585
    )BALANCE  March 31, 2011 (unaudited)
    
    
    11,502,563
    
    
    $
    11,503
    
    
    
    5,065,847
    
    
    $
    5,066
    
    
    $
    30,477,262
    
    
    $
    (46,625,595
    )
    
    $
    4,369
    
    
    $
    (16,127,395
    )
 See accompanying notes to condensed consolidated financial statements
 5




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##### Table of Contents



T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Three Months Ended March 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (640,585
    )
    
    $
    (1,681,739
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    81,749
    
    
    
    91,841Warranty expense
    
    
    30,794
    
    
    
    13,229Share-based compensation expense
    
    
    192,922
    
    
    
    292,461Change in fair value of derivative liabilities
    
    
    (989,737
    )
    
    
    (753,727
    )Amortization of debt discounts
    
    
    108,879
    
    
    
    554,851Change in operating assets and liabilities:Accounts and other receivables
    
    
    26,659
    
    
    
    (189,477
    )Inventories
    
    
    168,389
    
    
    
    (119,741
    )Prepaid expenses and other current assets
    
    
    (148,677
    )
    
    
    (391,490
    )Deposits
    
    
    (534
    )
    
    
    51Accounts payable and accrued expenses
    
    
    367,005
    
    
    
    (232,665
    )Related party payables
    
    
    
    
    
    
    (104,931
    )Net cash used in operating activities
    
    
    (803,136
    )
    
    
    (2,521,337
    )CASH FLOWS FROM INVESTING ACTIVITIES:Loans/advances to related parties
    
    
    (1,849
    )
    
    
    (1,607
    )Purchases of property and equipment
    
    
    
    
    
    
    (26,646
    )Repayment of loans/advances to related parties
    
    
    
    
    
    
    1,475Net cash used in investing activities
    
    
    (1,849
    )
    
    
    (26,778
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from related party notes payable
    
    
    1,000,000
    
    
    
    Recission of common stock
    
    
    
    
    
    
    (250,000
    )Deferred offering costs
    
    
    (24,806
    )Proceeds from the sale of preferred stock, net of issuance costs
    
    
    
    
    
    
    1,155,000Repayment of note payable
    
    
    (150,000
    )
    
    
    Net cash provided by financing activities
    
    
    825,194
    
    
    
    905,000Effect of exchange rate on cash
    
    
    
    
    
    
    205NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    20,209
    
    
    
    (1,642,910
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    123,861
    
    
    
    2,580,798CASH AND CASH EQUIVALENTS  end of period
    
    $
    144,070
    
    
    $
    937,888
 See accompanying notes to condensed consolidated financial statements
 6




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##### Table of Contents



T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  Continued
 Three Months Ended March 31,2011
    
    
    2010SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    
    
    
    $
    6,494Income taxes
    
    $
    
    
    
    $
    800Supplemental disclosure of non-cash activities:Conversion option of preferred stock and warrants issued with preferred stock recorded
as derivative liabilities
    
    $
    
    
    
    $
    1,401,360Deferred offering costs in connection with equity financing recorded in accounts payable
    
    $
    206,513
    
    
    $
    Reclassification of derivative liability to equity
    
    $
    
    
    
    $
    1,121,965Debt discount and warrant liabiltiy recorded upon issuance of warrants
    
    $
    
    
    
    $
    233,984Amortization of preferred stock discount related to conversion feature and warrants
    
    $
    864,800
    
    
    $
    1,672,882Conversion of preferred stock to common stock
    
    $
    
    
    
    $
    4,000
 See accompanying notes to condensed consolidated financial statements
 7




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##### Table of Contents



T3 MOTION, INC.
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization
   Interim Unaudited Condensed Consolidated Financial Statements
   Going Concern
   8




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##### Table of Contents



Public Offering of the Companys Equity Securities
   Debt and Preferred Stock Conversion into Common Stock and Common Stock Equivalent
Securities.
   1-for-10 Reverse Stock Split
  Lock Up Agreement
  9




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##### Table of Contents



Principles of Consolidation
  Reclassifications
  Use of Estimates
  Concentrations of Credit Risk
 Cash and Cash Equivalents
   Restricted Cash
  Accounts Receivable
   10




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##### Table of Contents



Accounts Payable
  Fair Value of Financial Instruments
       Revenue Recognition
   
 11




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##### Table of Contents



Share- Based Compensation
     Loss Per Share
  Three months ended March 31,2011
    
    
    2010(unaudited)Net loss
    
    $
    (640,585
    )
    
    $
    (1,681,739
    )Deemed dividend to preferred stockholders
    
    
    (864,800
    )
    
    
    (1,672,882
    )Net loss attributable to common stockholders
    
    $
    (1,505,385
    )
    
    $
    (3,354,621
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    5,065,847
    
    
    
    4,505,096Net loss per share:Basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.74
    )
 Business Segments
  12




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##### Table of Contents



For the Three Months      Ended March 31,2011
    
    
    2010(unaudited)Net revenues:T3 Series domestic
    
    $
    723,383
    
    
    $
    1,066,579T3 Series international
    
    
    273,179
    
    
    
    61,697CT Series domestic
    
    
    
    
    
    
    21,150Total net revenues
    
    $
    996,562
    
    
    $
    1,149,426
 NOTE 2  INVENTORIES
  March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)Raw materials
    
    $
    774,440
    
    
    $
    788,496Work-in-process
    
    
    65,962
    
    
    
    212,723Finished goods
    
    
    55,755
    
    
    
    63,327$
    896,157
    
    
    $
    1,064,546
 NOTE 3  PREPAID EXPENSES AND OTHER CURRENT ASSETS
  March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)Prepaid inventory
    
    $
    125,021
    
    
    $
    148,410Deferred offering costs
    
    
    231,319
    
    
    
    Prepaid expenses and other current assets
    
    
    275,123
    
    
    
    103,057$
    631,463
    
    
    $
    251,467
 NOTE 4  NOTE PAYABLE
  March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)Note payable to Preproduction
Plastics, Inc., interest payable monthly at
6% per annum, monthly payments of $50,000
plus interest, due May 2011
    
    $
    93,468
    
    
    $
    243,468
  13




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##### Table of Contents



NOTE 5  RELATED PARTY NOTES PAYABLE
  March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)Note payable to Immersive Media Corp., 19% interest rate, net of
discount of $0 and $108,879, respectively, due May 20, 2011
    
    $
    1,000,000
    
    
    $
    891,121Note payable to Vision Opportunity Master Fund, Ltd., 10% interest
rate, due June 30, 2011
    
    
    3,500,000
    
    
    
    3,500,000Note payable to Ki Nam, 10% interest rate per annum, due March 31, 2012
    
    
    2,121,000
    
    
    
    1,121,000Note payable to Alfonso and Mercy Cordero, 10% interest rate per
annum, due October 1, 2013
    
    
    1,000,000
    
    
    
    1,000,0007,621,000
    
    
    
    6,512,121Less: current portion
    
    
    (6,621,000
    )
    
    
    (4,391,121
    )$
    1,000,000
    
    
    $
    2,121,000
 Immersive Note
   First Amendment to Immersive Note
   14




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##### Table of Contents



Second Amendment to Immersive Note
   Third Amendment to Immersive Note
  Fourth Amendment to Immersive Note
  15




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##### Table of Contents



Repayment of Immersive Note
  Vision Opportunity Master Fund, Ltd. Bridge Financing
 December 30, 2009  10% Convertible Debenture
       16




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##### Table of Contents



Amendment to December 30, 2009 10% Convertible Debenture
  Second Amendment to December 30, 2009 10% Convertible Debenture
  Conversion of 10% Convertible Debenture Upon Closing of May Public Offering
  Debt Discounts and Amortization
  Ki Nam Note
 2010 Note
  Conversion of 2010 Note Upon Closing of May Public Offering
  2011 Note
  17




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##### Table of Contents



Lock-Up Agreement
  Alfonso Cordero and Mercy Cordero Note
   NOTE 6  DERIVATIVE LIABILITIES
      18




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##### Table of Contents



March 31,2011(unaudited)Annual dividend yield
    
    
    Expected life (years)
    
    
    0.25-4.08Risk-free interest rate
    
    
    0.30%-2.24
    %Expected volatility
    
    
    155%-156
    %
     Level 3
    
    
    Level 3Carrying Value
    
    
    Carrying ValueMarch 31,
    
    
    December 31,2011
    
    
    2010(unaudited)Embedded conversion options
    
    $
    5,117,813
    
    
    $
    5,991,957Warrants
    
    
    3,525,555
    
    
    
    3,641,148$
    8,643,368
    
    
    $
    9,633,105Decrease in fair value
    
    $
    989,737
 19




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##### Table of Contents



2011
    
    
    2010Beginning balance, January 1,
    
    $
    9,633,105
    
    
    $
    11,824,476Issuance of warrants and conversion option
    
    
    
    
    
    
    1,635,344Reclassification to equity due to conversion of preferred stock
    
    
    
    
    
    
    (1,121,965
    )Change in fair value
    
    
    (989,737
    )
    
    
    (753,727
    )Ending balance, March 31
    
    $
    8,643,368
    
    
    $
    11,584,128
 NOTE 7  EQUITY
 Series A Convertible Preferred Stock
      20




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##### Table of Contents



Common Stock
  NOTE 8  STOCK OPTIONS AND WARRANTS
 Stock Option/Stock Issuance Plan
    The Three Months EndedMarch 31,2011
    
    
    2010Stock compensation expense  cost of net revenues
    
    $
    12,143
    
    
    $
    25,310Stock compensation expense  sales and marketing
    
    
    25,224
    
    
    
    45,833Stock compensation expense  research and development
    
    
    23,155
    
    
    
    45,831Stock compensation expense  general and administrative
    
    
    132,400
    
    
    
    175,487Total stock compensation expense
    
    $
    192,922
    
    
    $
    292,461
  21




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##### Table of Contents



Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueOptions outstanding  January 1, 2011
    
    
    649,090
    
    
    $
    5.72Options granted
    
    
    330,000
    
    
    
    5.00Options exercised
    
    
    
    
    
    
    Options forfeited
    
    
    (9,823
    )
    
    
    5.10Options cancelled
    
    
    
    
    
    
    Total options outstanding  March 31, 2011
    
    
    969,267
    
    
    $
    5.48
    
    
    
    8.62
    
    
    $
    Options exercisable  March 31, 2011
    
    
    329,869
    
    
    $
    6.37
    
    
    
    6.86
    
    
    $
    Options vested and expected to vest  March 31, 2011
    
    
    621,664
    
    
    $
    5.02
    
    
    
    9.53
    
    
    $
    Options available for grant under the 2010 Plan at March 31, 2011
    
    
    42,050
   Options Outstanding
    
    
    Options ExercisableWeighted-Average
    
    
    
    
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Weighted
    
    
    
    
    
    
    AverageExercise
    
    Number of
    
    
    Contractual
    
    
    Average of
    
    
    Number of
    
    
    ExercisePrices
    
    Shares
    
    
    Life
    
    
    Exercise Price
    
    
    Shares
    
    
    Price$5.00
    
    
    675,767
    
    
    
    9.43
    
    
    $
    5.00
    
    
    
    47,338
    
    
    $
    5.00$6.00
    
    
    193,500
    
    
    
    6.78
    
    
    $
    6.00
    
    
    
    182,531
    
    
    $
    6.00$7.70
    
    
    100,000
    
    
    
    6.70
    
    
    $
    7.70
    
    
    
    100,000
    
    
    $
    7.70969,267
    
    
    
    8.62
    
    
    $
    5.48
    
    
    
    329,869
    
    
    $
    6.37
 Summary of Assumptions and Activity
   22




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##### Table of Contents



March 31,2011(unaudited)Expected term ( in years)
    
    
    6.02Expected volatility
    
    
    205
    %Risk-free interest rate
    
    
    2.6
    %Expected dividends
    
    
    Forefeiture rate
    
    
    2.8
    %
   Warrants
  Weighted-
    
    
    Weighted-AverageExercise
    
    
    Contractual
    
    
    Aggregate IntrinsicNumber of Shares
    
    
    Price
    
    
    Life (in years)
    
    
    ValueWarrants outstanding  January 1, 2011
    
    
    1,069,615
    
    
    $
    7.30Warrants granted
    
    
    
    
    
    
    Warrants exercised
    
    
    
    
    
    
    Warrants cancelled
    
    
    
    
    
    
    Warrants outstanding and exercisable- March 31, 2011
    
    
    1,069,615
    
    
    $
    7.30
    
    
    
    3.87
    
    
    $
    
 Amendment to Certain Class G Warrants
  NOTE 9  COMMITMENTS AND CONTINGENCIES
 Warranties
   23




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##### Table of Contents



2011
    
    
    2010Beginning balance, January 1,
    
    $
    165,641
    
    
    $
    235,898Charged to cost of revenues
    
    
    30,794
    
    
    
    13,229Usage
    
    
    (31,898
    )
    
    
    (33,978
    )Ending balance, March 31
    
    $
    164,537
    
    
    $
    215,149
 Legal Contingency
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
   Indemnities and Guarantees
  24




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##### Table of Contents



NOTE 10  RELATED PARTY TRANSACTIONS
  Controlling Ownership
  Accounts Receivable
   Related Party Payables
  Accrued Salary
  Notes Payable  see Note 5
 NOTE 11  SUBSEQUENT EVENTS
 Ki Nam Advances
   Fourth Amendment to Immersive Note
  25




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##### Table of Contents



Public Offering of the Companys Equity Securities
   Debt and Preferred Stock Conversion into Common Stock and Common Stock Equivalent
Securities.
   1-for-10 Reverse Stock Split
  Lock Up Agreement
  Immersive Note Repayment
  Amendment to Certain Class G Warrants
  26




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
  Going Concern
   27




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##### Table of Contents



Public Offering of the Companys Equity Securities
   Debt and Preferred Stock Conversion into Common Stock and Common Stock Equivalent
Securities.
   1-for-10 Reverse Stock Split
  Lock Up Agreement
  Critical Accounting Policies and Estimates
  28




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##### Table of Contents



Concentrations of Credit Risk
 Cash and Cash Equivalents
   Restricted Cash
  Accounts Receivable
   Accounts Payable
  Fair Value of Financial Instruments
   29




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##### Table of Contents



Level 1
 Level 2
 Level 3
  Revenue Recognition
      Business Segments
  30




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##### Table of Contents



For the Three Months      Ended March 31,2011
    
    
    2010(unaudited)Net revenues:T3 Series domestic
    
    $
    723,383
    
    
    $
    1,066,579T3 Series international
    
    
    273,179
    
    
    
    61,697CT Series domestic
    
    
    
    
    
    
    21,150Total net revenues
    
    $
    996,562
    
    
    $
    1,149,426
 Derivative Liabilities
       Loss Per Share
  31




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##### Table of Contents



Three months ended March 31,2011
    
    
    2010(unaudited)Net loss
    
    $
    (640,585
    )
    
    $
    (1,681,739
    )Deemed dividend to preferred stockholders
    
    
    (864,800
    )
    
    
    (1,672,882
    )Net loss attributable to common stockholders
    
    $
    (1,505,385
    )
    
    $
    (3,354,621
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    5,065,847
    
    
    
    4,505,096Net loss per share:Basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.74
    )
 Commitments and Contingencies
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
   32




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##### Table of Contents



Recent Events
 Ki Nam Advances
   Fourth Amendment to Immersive Note; Repayment
  Public Offering of the Companys Equity Securities
   Debt and Preferred Stock Conversion into Common Stock and Common Stock Equivalent
Securities.
   33




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##### Table of Contents



1-for-10 Reverse Stock Split
  Lock Up Agreement
  Amendment to Certain Class G Warrants
  34




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##### Table of Contents



Results of Operations
  Three Months Ended March 31,2011
    
    
    2010Net revenues
    
    $
    996,562
    
    
    $
    1,149,426Cost of net revenues
    
    
    956,932
    
    
    
    1,127,449Gross profit
    
    
    39,630
    
    
    
    21,977Operating Expenses:Sales and marketing
    
    
    311,750
    
    
    
    427,654Research and development
    
    
    233,912
    
    
    
    320,506General and administrative
    
    
    821,545
    
    
    
    1,029,413Total operating expenses
    
    
    1,367,207
    
    
    
    1,777,573Loss from operations
    
    
    (1,327,577
    )
    
    
    (1,755,596
    )Other income (expense), net:Interest income
    
    
    43
    
    
    
    903Other income, net
    
    
    991,694
    
    
    
    755,555Interest expense
    
    
    (303,945
    )
    
    
    (681,801
    )Total other income (expense), net
    
    
    687,792
    
    
    
    74,657Loss before provision for income tax
    
    
    (639,785
    )
    
    
    (1,680,939
    )Provision for income tax
    
    
    800
    
    
    
    800Net loss
    
    
    (640,585
    )
    
    
    (1,681,739
    )Deemed dividend to preferred stockholders
    
    
    (864,800
    )
    
    
    (1,672,882
    )Net loss attributable to common stockholders
    
    $
    (1,505,385
    )
    
    $
    (3,354,621
    )Other comprehensive income (loss):Foreign currency translation income
    
    
    
    
    
    
    205Comprehensive loss
    
    $
    (640,585
    )
    
    $
    (1,681,534
    )Net loss per share: Basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.74
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    5,065,847
    
    
    
    4,505,096
 Net revenues.
 35




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##### Table of Contents



Cost of net revenues.
 Gross profit.
 Sales and marketing.
 Research and development.
 General and administrative.
 Other income (expense), net.
 Deemed dividend.
 Net loss attributable to common stockholders.
 LIQUIDITY AND CAPITAL RESOURCES
  36




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##### Table of Contents



Cash Flows
 For the three months ended March 31, 2011 and 2010
      37




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##### Table of Contents



Off-Balance Sheet Arrangements
  Warrants
   Warrants Exercisable
    
    Exercise Price
    
    Expiration12,000
    
    $
    15.40
    
    
    
    3/31/201327,478
    
    $
    16.50
    
    
    
    12/29/2014195,373
    
    $
    7.00
    *
    
    
    12/29/2014400,000
    
    $
    7.00
    *
    
    
    12/30/2014160,000
    
    $
    7.00
    *
    
    
    2/2/201571,000
    
    $
    7.00
    *
    
    
    3/22/201594,764
    
    $
    7.00
    *
    
    
    3/31/2015104,000
    
    $
    7.00
    
    
    
    4/30/20155,000
    
    $
    7.00
    
    
    
    8/25/2015
 
 * Amendment to Certain Class G Warrants
   38




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
 Disclosure Controls and Procedures
  39




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40




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##### Table of Contents



Remediation of Material Weaknesses
  Changes in Internal Control over Financial Reporting
  
    
    We are in the process of further enhancing our internal finance and accounting
organizational structure, which includes hiring additional resources.
 
    
    We are in the process of further enhancing the supervisory procedures to include
additional levels of analysis and quality control reviews within the accounting and
financial reporting functions.
 
    
    We are in the process of strengthening our internal policies and enhancing our
processes for ensuring consistent treatment and recording of reserve estimates and that
validation of our conclusions regarding significant accounting policies and their
application to our business transactions are carried out by personnel with an appropriate
level of accounting knowledge, experience and training.
  41




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
   
 Item 1A. Risk Factors
  Risks Related to Our Company and Our Industry
 We have a history of losses and we expect to continue to have additional net losses in the near
future, which
could cause the value of our securities to decline and may even cause our business to fail.
  
    
    We may be unable to increase sales sufficiently to recognize economies of scale;
    
    We may be unable to successfully expand into other private security markets or achieve broad
brand recognition for our products;
    
    We may be unable to reduce our costs or experience unanticipated costs or expenses in
connection with our current development, marketing and manufacturing plans;
    
    We may encounter technological challenges in connection with
the development, introduction or manufacturing of enhancements to our existing vehicles or in the addition of new products; and
    
    We may be unable to obtain sufficient components or materials used in our products due to
capital constraints, which could adversely effect our sales, our reputation and credibility.
  If we are unable to continue as a going concern, our securities will have little or no value.
  42




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##### Table of Contents



Adverse conditions in the global economy and disruption in financial markets could impair our
revenues.
  We are dependent on a few single sourced third party manufacturers. Any interruption in our
relationships with
these parties may adversely affect our business.
  Our officers and directors own a substantial portion of our outstanding common stock, which will
enable them
to influence many significant corporate actions and in certain circumstances may prevent a change
in control
that would otherwise be beneficial to our shareholders.
  43




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##### Table of Contents



Risks Relating Ownership of Our Securities
 Substantial future sales of our common stock in the public market may depress our stock price.
     We may raise additional capital through a securities offering that could dilute your ownership
interest and
voting rights.
    Our incorporation documents and Delaware law may inhibit a takeover that stockholders consider
favorable
and could also limit the market price of your stock, which may inhibit an attempt by our
stockholders to change
our direction or management.
 44




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##### Table of Contents




    
    authorize our board of directors to determine the rights, preferences, privileges and
restrictions granted to, or imposed upon, the preferred stock and to
fix the number of shares constituting any series and the designation of such series without further action by
our stockholders;
    
    prohibit stockholders holding less than 25% of the outstanding voting shares from calling
special
meetings; and
    
    establish advance notice requirements for submitting nominations for election to the board
of directors and for proposing matters that can be acted upon by stockholders at a meeting.
   Our shares of common stock may be thinly traded, so you may be unable to sell at or near ask prices
or at all if you need to sell your shares to raise money or otherwise desire to liquidate your
shares.
   45




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There is no guarantee that our securities will remain listed on AMEX.
  Our liquidity of our common stock and market capitalization could be adversely affected by the
recent reverse stock split.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
 None
 
 Item 3.
    
    Defaults Upon Senior Securities.
 None
 
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information.
   46




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##### Table of Contents



Item 6.
    
    Exhibits.
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    
    Amended and Restated Certificate of Incorporation, as currently in effect(1)3.2
    
    
    Bylaws(1)3.3
    
    
    Amendment to Bylaws, dated January 16, 2009(2)3.4
    
    
    Amendment to Certificate of Incorporation(3)3.5
    
    
    Certificate of Designation of Preferences, Rights and Limitations of Series
A Convertible Preferred Stock(3)31.1
    
    
    Section 302 Certificate of Chief Executive Officer*31.2
    
    
    Section 302 Certificate of Chief Financial Officer*32.1
    
    
    Section 906 Certificate of Chief Executive Officer*32.2
    
    
    Section 906 Certificate of Chief Financial Officer*
 
 *
    
    Filed herewith.(1)
    
    Filed with the Companys Registration Statement on Form S-1 filed on May 13, 2008.(2)
    
    Filed with the Companys Current Report on Form 8-K filed on January 20, 2009.(3)
    
    Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended September 30,
2009 and filed on November 16, 2009. 47




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##### Table of Contents



Date: May 23, 2011
    
    T3 MOTION, INC.(Registrant)By:
    
    /s/ Ki NamKi NamChairman of the Board and Chief Executive OfficerDate: May 23, 2011
    
    T3 MOTION, INC.(Registrant)By:
    
    /s/ Kelly AndersonKelly AndersonExecutive Vice President and Chief Financial Officer
 48